Clothing designers must pay VAT under the general regime

A recent binding ruling from the Directorate General of Taxes (DGT) establishes the tax obligations for individuals engaged in the design and online sale of clothing. The technical criteria define both the classification within the Economic Activities Tax (IAE) and the treatment applicable to Value Added Tax (IVA).

What the DGT has ruled

The tax authority determines that professionals dedicated to the manufacturing of clothing must register under heading 453 of the IAE. This registration is mandatory due to the nature of the manufacturing activity, regardless of whether the activity might be exempt from said tax.

Regarding IVA, the DGT points out that sales of designed clothing must be taxed under the general regime. The main reason is that the equivalence surcharge regime is not applicable to products that have undergone manufacturing or production processes by the seller themselves. Therefore, the activity is excluded from this simplified regime.

Finally, the obligation to issue invoices for the operations carried out is confirmed, allowing the use of simplified invoices only in the specific cases contemplated by current regulations.

What this means for you

If you engage in the design and manufacturing of clothing for subsequent sale, you cannot opt for the equivalence surcharge regime. This implies that you must manage your IVA settlements through the general regime, which entails the obligation to declare both the IVA charged on your sales and the IVA paid on your purchases and professional expenses.

Likewise, document management is key. You must ensure that every sale has the appropriate documentary support, respecting the conditions for the use of simplified invoices and maintaining the traceability of your manufacturing processes.

What you should do

It is necessary to verify that the registration in the IAE is correct under the manufacturing heading to avoid discrepancies with the administration. Since the general IVA regime requires more rigorous accounting and settlement management than the equivalence surcharge, it is fundamental to have precise control over purchase invoices and sales made to optimize the management of deductions permitted by Law 37/1992.